Reprinted from Pharma Times WORLD NEWS | APRIL 08, 2014

LYNNE TAYLOR

Pharmaceutical companies need to stop simply paying lip-service to patients and radically alter their business models if they are to meet increasing global demand while improving patient outcomes, says KPMG

The sector’s return on R&D expenditure has fallen in 20 years from an industry average of around 20% to 10%, new research from the advisory firm shows. Together with dramatically falling price-earnings ratios across the industry, this explains why investors are attributing less value to companies’ product pipelines, it says.

“The business model that has powered the pharma industry over the last few decades is showing signs of fatigue – costs are skyrocketing, breakthrough innovation is ebbing, competition is intense and sales growth is flattening,” comments Chris Stirling, global head of KPMG’s life sciences practice.

“The current industry model does not put the patient at the heart of its decision-making. Judgements are instead driven by developments that create blockbuster products, which in turn are expected to drive blockbuster returns for shareholders.  Such an approach demands an all-consuming focus on products, and all too often leaves the patient as an afterthought,” he says.

A recent study published in the New England Journal of Medicine found that over half of all drug approvals over the last 10 years have received approval without demonstrating any tangible benefit to the patient.  Yet Germany has introduced regulations stipulating that treatments are approved and paid for only if they can demonstrate improved health outcomes, and other governments are expected to follow.

“The industry needs to switch from a “product push” to a much more service-orientated model where the needs of the patient are at the very epicentre. Not only will this lead to new revenue streams, satisfying the demands of corporate shareholders, it will help create better understanding of medical conditions, allowing the development of more innovative, patient-centred treatments, said Mr Stirling.

“Ultimately, we need to change our perception of the pharmaceutical ‘value chain’ to a new ‘value ecosystem’ which puts the patient and the customer at its centre, with other business services wrapped around their needs. Some companies have already started to grasp the nettle and are moving in the right direction – for instance, one life sciences company we spoke to is currently working on an innovative approach to diabetes,” he noted.

This firm engaged with diabetic patients directly, seeking to understand how the condition affects them across the disease cycle, and then involved the patients in designing their own treatment model. The resulting pilot provided a suite of treatments that went beyond simple doses of insulin, delivering services such as text alerts reminders for patients to take their medication and treatments for other aspects of the disease such as eye tests.

Collaboration between firms is also imperative, says KPMG. Initiatives such as clinical trial “data sharing” between organisations, where an independent third party acts as a gatekeeper to access requests, are already starting to gain momentum, while open-source R&D is being pioneered in India to speed discoveries in treatment for diseases such as tuberculosis, malaria and HIV.

“Although healthcare demands are higher than ever before, we’re also in a golden age of discovery,” says Mr Stirling. “If the pharmaceutical industry is to capitalise upon this potential, it must innovate to develop new business models and find better ways to collaborate across the healthcare ecosystem – all the while putting the patient at the heart of everything it does,” he concludes.

Read more at: http://www.pharmatimes.com/Article/14-04-08/Pharma_business_model_must_change_radically_KPMG.aspx#ixzz2yTrppMP7 
Follow us: @PharmaTimes on Twitter

Screenshot 2014-04-10 07.17.50

 

 

 

This is a demo store for testing purposes — no orders shall be fulfilled. Dismiss